1MDB to be liquidated soon-IPIC has absolutely no reason to accept "China will pay" plan,and rating agencies must now count 1MDB debt as sovereign debt
by Ganesh Sahathevan
1 MDB CEO Arul Kanda famously declared almost a year ago
"My Job Is Done Here" .He said then that he was leaving, but sstill remains in that post.
Malaysian govt prepares to wind up 1MDB amid scandal
State fund's assets to be transferred to two companies owned by Finance Ministry
Leslie Lopez Regional Correspondent In Kuala Lumpur
The Malaysian government is laying the groundwork to shut down 1Malaysia Development Berhad (1MDB), the state investment firm mired in a scandal that has become the most serious blight on Prime Minister Najib Razak's administration at home and abroad.
Under a plan spearheaded by a high-level government unit called the Budiman committee, the assets of the state development fund will be transferred in the coming months to two companies owned by the Finance Ministry.
These valuable assets are two massive plots of land in Kuala Lumpur and one on Penang island.
1MDB, which at one point had debts totalling US$12 billion (S$17.2 billion), last November sold off its other main asset - power plants grouped under Edra Energy - to a Chinese company for RM17 billion (S$5.4 billion).
The three plots of land will be transferred to Piramid Pertama and Aroma Teraju, according to government officials and lawyers involved in 1MDB's debt workout.
"The resolution of 1MDB's debt obligations will be carried out separately by the government," said a senior government official familiar with the exercise.
Datuk Seri Najib, who set up 1MDB seven years ago to spur development at home and to pursue strategic investments abroad, has repeatedly rejected claims that 1MDB had morphed into a private political slush fund for him and his ruling Umno party.
1MDB LIABILITIES
RM5 BILLION
Sukuk bond due in 2039.
RM800 MILLION
Loan from workers' social security fund Socso due in 2022.
RM2.4 BILLION
Bandar Malaysia sukuk bond.
US$3 BILLION
International bond due in 2023.
US$6.48 BILLION
Under dispute with Abu Dhabi state fund IPIC and its unit Aabar Investments PJS.
To head off the deepening crisis at 1MDB last year, the government decided to dissolve the company and embark on a divestment of its assets to settle its debts.
The Budiman committee, headed by Second Finance Minister Johari Abdul Ghani, was set up last April to handle the restructuring.
In a recent interview with The Straits Times, Datuk Seri Johari noted that proceeds from the sale of 1MDB's power generation business had helped settle debts owed to Malaysian banks.
"Our next move is to kick-start the property development of Bandar Malaysia and TRX," he said, referring to 1MDB's two major real estate projects on the fringes of Kuala Lumpur.
Bandar Malaysia, 40 per cent owned by 1MDB and 60 per cent by a Malaysian-Chinese consortium, is an upcoming township being built on 197ha of land on the edge of Kuala Lumpur. It will house the Singapore-KL high-speed rail terminus.
Nearby is the 28ha Tun Razak Exchange, or TRX, which is slated to be the capital's financial hub.
Another plot of real estate to be transferred out of 1MDB is a 94.7ha parcel of land in Penang's Air Itam district.
Still, officials and financial executives said the debt workout faced numerous hurdles.
A major challenge will be securing support for the plan from 1MDB's bond holders and creditors.
1MDB's current debt load is estimated at US$4.78 billion.
Separately, the Malaysian entity is locked in a dispute with two Abu Dhabi state-owned concerns, which are demanding US$6.48 billion for financial guarantees on a bond issue and direct loans extended to 1MDB.
1MDB's debt profile is also complex. "Some (of the debt comes with) outright guarantees, some are with letters of comfort and letters of support," said a lawyer close to the situation.
To win approval for the plan, the government must guarantee 1MDB's creditors and holders of billions of dollars in bonds that it will honour all obligations of the state-owned entity upon its liquidation as a company, officials and bankers said.
A version of this article appeared in the print edition of The Straits Times on January 07, 2017, with the headline 'Malaysian govt prepares to wind up 1MDB amid scandal'. Print Edition | Subscribe
It has been previously reported here that IPIC is not likely to accept Malaysia's 1MDB debt repayment plan.. Now, Leslie Lopez of ST Singapore is reporting that 1MDB will soon be liquidated.
A liquidation ,or even the likelihood of liquidation, will require IPIC to seek immediate repayment of the bonds, from 1MDB and the Malaysian Government as guarantor.
Given the government guarantees and other undertakings the 1MDB debts are now clearly an obligation of the Government of Malaysia, and ratings agencies can no longer pretend otherwise..
END
State fund's assets to be transferred to two companies owned by Finance Ministry
Leslie Lopez Regional Correspondent In Kuala Lumpur
The Malaysian government is laying the groundwork to shut down 1Malaysia Development Berhad (1MDB), the state investment firm mired in a scandal that has become the most serious blight on Prime Minister Najib Razak's administration at home and abroad.
Under a plan spearheaded by a high-level government unit called the Budiman committee, the assets of the state development fund will be transferred in the coming months to two companies owned by the Finance Ministry.
These valuable assets are two massive plots of land in Kuala Lumpur and one on Penang island.
1MDB, which at one point had debts totalling US$12 billion (S$17.2 billion), last November sold off its other main asset - power plants grouped under Edra Energy - to a Chinese company for RM17 billion (S$5.4 billion).
The three plots of land will be transferred to Piramid Pertama and Aroma Teraju, according to government officials and lawyers involved in 1MDB's debt workout.
"The resolution of 1MDB's debt obligations will be carried out separately by the government," said a senior government official familiar with the exercise.
Datuk Seri Najib, who set up 1MDB seven years ago to spur development at home and to pursue strategic investments abroad, has repeatedly rejected claims that 1MDB had morphed into a private political slush fund for him and his ruling Umno party.
1MDB LIABILITIES
RM5 BILLION
Sukuk bond due in 2039.
RM800 MILLION
Loan from workers' social security fund Socso due in 2022.
RM2.4 BILLION
Bandar Malaysia sukuk bond.
US$3 BILLION
International bond due in 2023.
US$6.48 BILLION
Under dispute with Abu Dhabi state fund IPIC and its unit Aabar Investments PJS.
To head off the deepening crisis at 1MDB last year, the government decided to dissolve the company and embark on a divestment of its assets to settle its debts.
The Budiman committee, headed by Second Finance Minister Johari Abdul Ghani, was set up last April to handle the restructuring.
In a recent interview with The Straits Times, Datuk Seri Johari noted that proceeds from the sale of 1MDB's power generation business had helped settle debts owed to Malaysian banks.
"Our next move is to kick-start the property development of Bandar Malaysia and TRX," he said, referring to 1MDB's two major real estate projects on the fringes of Kuala Lumpur.
Bandar Malaysia, 40 per cent owned by 1MDB and 60 per cent by a Malaysian-Chinese consortium, is an upcoming township being built on 197ha of land on the edge of Kuala Lumpur. It will house the Singapore-KL high-speed rail terminus.
Nearby is the 28ha Tun Razak Exchange, or TRX, which is slated to be the capital's financial hub.
Another plot of real estate to be transferred out of 1MDB is a 94.7ha parcel of land in Penang's Air Itam district.
Still, officials and financial executives said the debt workout faced numerous hurdles.
A major challenge will be securing support for the plan from 1MDB's bond holders and creditors.
1MDB's current debt load is estimated at US$4.78 billion.
Separately, the Malaysian entity is locked in a dispute with two Abu Dhabi state-owned concerns, which are demanding US$6.48 billion for financial guarantees on a bond issue and direct loans extended to 1MDB.
1MDB's debt profile is also complex. "Some (of the debt comes with) outright guarantees, some are with letters of comfort and letters of support," said a lawyer close to the situation.
To win approval for the plan, the government must guarantee 1MDB's creditors and holders of billions of dollars in bonds that it will honour all obligations of the state-owned entity upon its liquidation as a company, officials and bankers said.
A version of this article appeared in the print edition of The Straits Times on January 07, 2017, with the headline 'Malaysian govt prepares to wind up 1MDB amid scandal'. Print Edition | Subscribe
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